Split on Securities Misstatements Faces High Court Reckoning

WASHINGTON (CN) – The Supreme Court took up a case Monday where an investment broker was held liable for misstatements that his boss ordered him to make to potential investors.

In 2009, while working at a registered broker-dealer called Charles Vista, Francis Lorenzo was following orders from the firm’s owner when he reached out to potential investors about a Charles Vista client that claimed to have produced a device able to convert solid waste to gas.

Though Lorenzo assured investors that the client had over $10 million in confirmed assets, the Securities and Exchange Commission said Lorenzo knew in fact that the client’s intangible assets had been devalued.

The SEC ordered Lorenzo to pay a $15,000 penalty, and the D.C. Circuit affirmed last year.

Lorenzo noted in a petition for certiorari, however, that the circuits are divided as to whether a misstatement claim can be repackaged and pursued as a fraudulent-scheme claim.

“The Second, Eighth and Ninth Circuits have held that a misstatement alone cannot be the basis of a fraudulent scheme claim, while the D.C. Circuit and the Eleventh Circuit have held that a misstatement standing alone can be the basis of a fraudulent scheme claim,” the petition notes.

Per its custom, the Supreme Court did not issue any statement Monday in taking up Lorenzo’s case.

Lorenzo is represented by Meyers & Heim attorney Robert Heim.